University Patent Practice: Practice

Posted on July 15, 2016 by Gerald Barnett

Here are five ways to use a patent:

  1. Nonuse     Don’t practice the claimed invention and exclude all others
  2. Troll          Don’t practice, demand payment if others practice the claimed invention
  3. Flip           Don’t practice, and exclusively license, assign, or sell the patent
  4. Practice   Practice the claimed invention while excluding all others
  5. Share       Practice and allow others to practice the claimed invention

Each of these methods has its own variations–some with significantly varied effects. Let’s look at each of these approaches and consider university patent management practices. The first three patent uses involve non-practice. Now let’s turn to the two university management practices that involve university practice of an invention–that is, the value includes the value of using the invention, not just manipulating patent rights. First, Practice itself.

Practice

We arrive at what perhaps is the primary and original method of using a patent. One practices the invention to derive a benefit from doing so, while using the patent to exclude others who would cut in on that benefit by creating copy-cat services that break apart the market even before the inventor can establish his (or her) own products in the market place.

University administrators, however, for the most part do not consider the university to be a proper place to develop or practice patentable inventions, other than for “noncommercial research and education.” Thus, they don’t see that the primary method of using a patent much matters unless they can find someone else–other than the inventor–who will step in and adopt the patent as cover for practicing the invention. What is odd in this thinking is the disregard for whether a patent is at all necessary for someone to choose to practice a university-based invention. That is, a university exclusive license is akin to a private re-issue of a patent, but now as a franchise rather than in recognition of the rights of an inventor having made an invention. The company receiving the exclusive license is not the inventor, just an operator.

The assumption that gets added is that all inventions require “development” before they can become “commercial products.” Continue reading →

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University Patent Practice: Flip

Posted on July 14, 2016 by Gerald Barnett

Here are five ways to use a patent:

  1. Nonuse     Don’t practice the claimed invention and exclude all others
  2. Troll          Don’t practice, demand payment if others practice the claimed invention
  3. Flip           Don’t practice, and exclusively license, assign, or sell the patent
  4. Practice   Practice the claimed invention while excluding all others
  5. Share       Practice and allow others to practice the claimed invention

Each of these methods has its own variations–some with significantly varied effects. Let’s look at each of these approaches and consider university patent management practices. The first three patent uses involve non-practice. We have looked at Nonuse and Troll. Now it’s time for Flip.

Flip

The third form of non-use involves flipping a patent to a new owner and receiving payment for making the flip, from the patent-dependent activity of the new owner, or both.  A flip may involve the assignment of a patent, the sale of the patent, or an exclusive license to the patent. There may or may not be any transfer of the underlying invention–a flip focuses on the transfer of the patent right rather than the technology.

As with nonuse and trolling, there are a number of ways that a flip can be done, and a wide variation in outcomes. In a simple flip, a patent is sold to a new owner, who obtains the “entire right, title, and interest” in the patent. The prior owner, after the sale, has no standing with regard to the patent and needs permission of the new owner to practice the claimed invention. But the prior owner typically receives a lump sum payment for the patent. That payment reflects a negotiated value based on a perception of the future value of the patent. It’s not so easy, however, to get at whose perception of future value is in play. If the prior patent owner demands a price that reflects the full value of the patent to the potential new owner, then why would the new owner purchase the patent?–all the new owner could possibly do is recover the purchase price from exploiting the patent (or the underlying invention, or both). The price of the flip, then, tends to reflect the value a market places on the asset, based on the position of the seller, not the buyer. Continue reading →

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University Patent Practice: Troll

Posted on July 13, 2016 by Gerald Barnett

Here are five ways to use a patent:

  1. Nonuse     Don’t practice the claimed invention and exclude all others
  2. Troll          Don’t practice, demand payment if others practice the claimed invention
  3. Flip           Don’t practice, and exclusively license, assign, or sell the patent
  4. Practice   Practice the claimed invention while excluding all others
  5. Share       Practice and allow others to practice the claimed invention

Each of these methods has its own variations–some with significantly varied effects. Let’s look at each of these approaches and consider university patent management practices. The first three patent uses involve non-practice. Here’s a discussion of trolling.

Troll

In an early computer game, Colossal Cave Adventure, you come to a bridge guarded by a troll. If one has collected the right stuff, the troll lets you pass. Otherwise, you are stuck. In patent trolling, much the same thing happens, except the troll is a patent owner and the bridge is a set of patent claims and you have already crossed the bridge and are trapped. Some folks don’t like the term “troll” and use “non-practicing entity” (or NPE), and others

Here’s the Electronic Frontier Foundation description of a patent troll:

A patent troll uses patents as legal weapons, instead of actually creating any new products or coming up with new ideas. Instead, trolls are in the business of litigation (or even just threatening litigation). They often buy up patents cheaply from companies down on their luck who are looking to monetize what resources they have left, such as patents. Unfortunately, the Patent Office has a habit of issuing patents for ideas that are neither new nor revolutionary, and these patents can be very broad, covering everyday or commonsense types of computing – things that should never have been patented in the first place. Armed with these overbroad and vague patents, the troll will then send out threatening letters to those they argue infringe their patent(s).  These letters threaten legal action unless the alleged infringer agrees to pay a licensing fee, which can often range to the tens of thousands or even hundreds of thousands of dollars.

Continue reading →

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University Patent Practice: Nonuse

Posted on July 12, 2016 by Gerald Barnett

Here are five ways to use a patent:

  1. Nonuse     Don’t practice the claimed invention and exclude all others
  2. Troll          Don’t practice, demand payment if others practice the claimed invention
  3. Flip           Don’t practice, and exclusively license, assign, or sell the patent
  4. Practice   Practice the claimed invention while excluding all others
  5. Share       Practice and allow others to practice the claimed invention

Each of these methods has its own variations–some with significantly varied effects. Let’s look at each of these approaches and consider university patent management practices. The first three patent uses involve non-practice. Consider nonuse as a licensing strategy and outcome.

Nonuse

In nonuse, the patent owner doesn’t use the invention and uses the patent to prevent everyone else from using the invention. Why? There can be a number of motivations. One is that the invention represents a product or product feature that would compete with or degrade a company’s current products or product features. Another is that the invention represents a potential product or product improvement for some other company–and the patent owner can disrupt that product pathway. A company might consider holding an invention for possible later use without any clear intention to develop it at present. One later use involves trading patents–cross-licensing, say, or contributing to a standard. Or a company believes that by puffing up its patent portfolio it will look impressive to investors or competitors or potential acquirers. That is, the patent has more apparent value than the use of the invention. Continue reading →

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Three once-concerns regarding university patents

Posted on July 6, 2016 by Gerald Barnett

Historically, there have been three areas of concern for the limitation of university involvement in patenting: (1) the monopoly effect of IP, (2) worrisome commercial behaviors, and (3) the problem of money as an apparent motivation. In the past, when university inventors routinely retained rights to their inventions, these concerns were raised in the context of the inventors’ interests and behaviors. Inventors might block research; inventors might run a business from their university office; inventors might be biased by the lure of riches; inventors might not share their riches with the public.

Now, when universities claim ownership of inventions and pass control to administrators, these same concerns apply to the administrators, and to the behaviors that they make the university (as a fictional person-thing-golem) do. Oddly, what was seen as worrisome in individual inventors becomes virtuous in the hands of an institution.

The burden of university patent policy then, typically written by administrators for administrators, is to relieve administrators of the burden of these concerns, even while justifying the policy of ownership as the proper approach to resolving the concerns that arise with personal ownership of inventions.

Let’s look at each of these concerns, then. First, the monopoly aspect of patents. Continue reading →

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A patent policy’s stated objectives mean something

Posted on July 5, 2016 by Gerald Barnett

University patent administrators don’t see that the patents they own and manage are any different from any other patents–exclusion of use, licensing (especially exclusively, for the duration of the patent), litigation, and indifference (failing to license, but no matter) are all available as possible strategies of exploitation. Administrators do, however, routinely cover whatever they do with the general claim that their actions are “in the public interest.” For this claim, apparently, it is expected there will be no challenge. Yet a statement made on behalf of a corporate entity is about as sketchy as one can get. The university might be said to act “in the public interest” as if by definition. But administrators can wordsmith all the pleasant-sounding statements they want to for the fictional person of the university and never reveal their own, personal intentions, which may have nothing more to them than a wish that others will believe their actions are intended to be “in the public interest”–that is, never examined.

As a result, university administrators work to pre-empt any responsibility (or liability) to the public for their actions. They adjust policy statements to exempt themselves from responsibility. They maintain special access to university counsel to make sure their actions are defended, not investigated. They write marketing text to present to the faculty and public that spins their work as ever positive and never with adverse consequences. They control what information is released, and never release information regarding inventions they have claimed but have not licensed or even if licensed have never been used or resulted in a meaningful commercial product.

Administrators assert that their actions support the public interest, but they are unwilling to allow the public–or industry, or government officials–to inspect their work or ask whether their assertions match the outcomes. That is, for university administrators, it appears sufficient to have in patent policy a university statement about the intention of doing good, without any consequences for failing to achieve such good. Continue reading →

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Regulatory limitations on fun-lovin’ university patent administrators

Posted on July 2, 2016 by Gerald Barnett

My argument is that university patents aren’t like other patents–not like corporate patents, not like entrepreneur patents, not like speculator patents. My argument also is that universities are limited in how they manage patents, and therefore they are not in the same position as companies or entrepreneurs or speculators, and cannot simply adopt the methods of companies, or of inventors, or of patent trolls.

Here is a list of regulatory limitations on university management of patents: Continue reading →

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Should universities manage patents like corporations do?

Posted on July 2, 2016 by Gerald Barnett

We have discussed how university-owned patents are not like other patents. A university owner of patents is not free to do just anything with a patent. A university-held patent is not simply a property right–there are limitations (though many university patent administrators are happy to forget them).

The reasons for these limitations include federal law, regulations, and funding agreements; a university’s own public commitments and policies; and of course its funding agreements. There may also be state laws. Not every limitation applies to every possible patent, but these limitations cover the majority of cases.

There is a debate that underlies the situation. Should university-owned patents be different from other patents? My answer is “yes”–and I give reasons that back the answer. Certainly there are those who disagree. It would be interesting to see their reasoning.

A different version of the question is this: Should universities manage their patents differently from how corporations, in particular, manage patents? But this question is misleading. You might think that the answer I would give also would be “yes.” Continue reading →

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A Good Policy for a Patent-Trolling University

Posted on June 26, 2016 by Gerald Barnett

Let’s continue the discussion of how university-owned patents might differ from other patents. We have considered the idea of “first use exhaustion” under Bayh-Dole: if the express purpose of Bayh-Dole is to use the patent system to promote utilization of subject inventions (inventions made by contractors with federal support), then once utilization has taken place, the owner of a patent on a subject invention is limited to actions that will promote use, not exclude use or tax use. Once there’s use, suing to stop use is not an option.

Except, of course, many university administrators and the attorneys who advise them don’t see any difference. For them, a patent is personal property, a right, not a privilege, a shotgun to shoot off whenever someone strays near university property. For such folk, Bayh-Dole’s statement of objectives is just so much Congressional fluff, having no meaning other than to say feel-good things about the law.

But Bayh-Dole is made part of federal patent law. And federal patent law (35 USC 261) says that a patent has the *attributes* of personal property, subject to the conditions of federal patent law, and thus also subject to the conditions of Bayh-Dole, and therefore also subject to the conditions of every part of Bayh-Dole, including its statement of objectives. For a patent on a subject invention (also defined in federal patent law as a new class of invention) to have the attributes of personal property, the patent must be used within the conditions of Bayh-Dole. Otherwise, the patent does not have the attributes of personal property, and there is no action available for the infringement of that personal property right.

Let’s consider some other ways that university-owned patents might be managed differently from other patents. Continue reading →

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Free Competition and Reasonable Pricing of Products Based on Subject Inventions

Posted on June 22, 2016 by Gerald Barnett

I have argued that the Bayh-Dole Act establishes, for inventions made with federal support at universities, a principle of patent exhaustion. We might call it a “first use” exhaustion of patent rights. Since the express, statutory purpose of the Act is to use the patent system to promote the utilization of subject inventions, then when this purpose is achieved, the Act places limits on what a university owner of a patent on a subject invention might do. If the university has not licensed the patent before use begins, then the university is limited in what recourse it has. It has no basis in the Bayh-Dole Act to then exclude those uses, merely because the development of such use did not require a license, nor an exclusive position, to induce the private interests to practice the invention.

That Bayh-Dole states its objectives expressly means something. So is the fact that Bayh-Dole is placed in the federal patent statute. The preamble has meaning. That meaning is to place a limit on what the owner of a patent on a subject invention can do with it. If the patent system is not needed to promote utilization, then the law is satisfied. If the university owner of a patent on a subject invention fails to license the invention to companies before they practice the invention, then it loses the right to demand such licenses. It’s a race against time, against “patent use exhaustion.”

One might say that the statement of objectives made expressly in the Bayh-Dole Act prohibits university trolling of industry with a patent on a subject invention. Otherwise, there’s no point in even reading the objectives, even though they are part of the statute. There’s a principle of statutory interpretation that argues no part of a statute should be, as Larry Eig puts it, “construed as ‘mere surplusage'”: Continue reading →

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